This week’s assignment was too interview an entrepreneur about embeddedness and how it plays a role in his or her business.
Through a friend of mine I got to know an entrepreneur who owns a furniture store which she just started this year. She is 31 year old and makes this furniture together with her partner, it is all wood. The neat thing from their business is if a customer wants a custom size or colour, for instance, table they can do this fairly easily and cheap because it is not a huge business and they make the furniture themselves. I asked her how big her network was and how she used it, she replied that her network started off really small and she just sold furniture to mainly friends, but after a while through these friends people would ask where they got their furniture from and they would come and have a look. In this way her network grew bigger and stronger.
A component of embeddedness is trust, and this also plays an important role in her company. First she made a deal with a wood supplier to deliver her good quality wood, if they deliver bad quality wood she could only produce bad quality furniture. Second her partner builds all the furniture while she does the finishing on it so the trust between her partner and her needs to be there otherwise the business would fall apart. And third her friends sometimes help getting her product out in the world and recommending it, either through showing off their own furniture (which they got from her) or through Facebook.
I explained the concepts of embedded-tie and arm’s length-tie. An embedded-tie is a tie which is close and that you can trust, an arm’s length-tie is someone that is less close and only talk to on a business level. She said that her friends and partner definitely were an embedded tie and that the wood supplier was more of an arm’s-length tie.
The paradox of embeddedness is that one could become over-embedded and be isolated from the market demand or opportunities. She is not really concerned with over-embeddedness, since she knows who she can trust and right now is just looking to extend her network. She said that she agrees with the concept but not applicable in her start-up situation right now. The entrepreneur’s network is growing but still quite small, this was actually useful for me because she could tell me exactly how her network was put together and who the embedded-ties and the arm’s length-ties were. She has a neat company and I think it will grow into something bigger.
See you next week,
Matthijs de Mari
This week for the course of Enterpreneurship Networks I interviewed and entrepreneur asking about embeddedness and what that means to him and to what extend he is embedded and whether he is overembedded or not.
After explaining what embeddedness is, I interviewed an owner of a small grocery store, which sells food like sandwiches butt also cigarettes and chewing gum etcetera. The business is in the same street as where I live and doesn’t exist for that long yet, somewhat over half a year, and for me a perfect opportunity to also get to learn the entrepreneur behind this business.
This entrepreneur told me he was well embedded, had enough people around him he can trust and told me at this point he didn’t need to have more embeddedness with the network he works with. It is a rather small business, easy to run with his family and business partner. The trust he has with these people and the help he gets with the problems to solve is enough for him. I tried to explain what the benefits might be if he would create more embeddedness among the suppliers for instance and he said he never really thought about this and he would try to reconsider creating a better relationship with the suppliers. He especially seemed interested in the fact that it would be easier to make appointments with the suppliers maybe more that would fit his schedule better, and of course the possible discount.
Right now he doesn’t see the risk of overembeddedness since most of his contacts are family and he knows he can trust them completely, but he did say that it might of course be risk for him, especially because the business is so small, so he think he is dependant from his network faster then bigger businesses.
This entrepreneur does perceive embeddedness as quite paradoxical. He understands that if he would be to expend in some way he would need a bigger network and probably also keep the network close, but not to close.
So this entrepreneur has not yet reached the stage of overembeddedness because the business is still very young but sees and understands the problem.
Entrepreneurship & Networks
Hello readers! This week’s assignment of the course Entrepreneurship & Networks is about embeddedness. Firstly, I’ll give a short theoretical explanation for the concepts structural embeddedness, relational embeddedness and the paradox of embeddedness. Then I will connect the theory to practice by interviewing an entrepreneur.
Structural embeddedness is the structure of the overall network/configuration of one’s network (Granovetter, 1992). Relational embeddedness can be explained as the personal relationships people have developed with each other through a history of interactions (Nahapiet and Ghoshal, 1998). In general, embeddedness is beneficial because it enriches your network, but when an entrepreneur becomes over-embedded it will result in complete insulation of network from market demands and new possibilities. This is called the paradox of embeddedness.
I’ve invited the entrepreneur Meysam, an owner of a restaurant, for an interview about his structural and relational embeddedness. During the interview, I realized that the most important component of his embeddedness was trust. He said for example that he knew most of his suppliers in person and that they were good friends. As a result of that, it wouldn’t really matter if he would pay them after a while and even if he would pay them less than the normal price. Of course it’s also true the other way around. For instance if the flesh Meysam gets is not so good, he would not immediately ask his money back but he would just make the supplier aware of it. These are examples of two of the outcomes of embeddedness, namely integrative agreements and investment advantages. However, he consciously tries to keep the ties between him and his employees at arm’s length. Meysam is aware of the fact that it’s not always beneficial to have embedded ties. This is because he was very close with his employees before (over-embeddedness) which resulted in derailed performance (an outcome of over-embeddedness). They would for example be very late and always wanted to go home early, but at the same time wanted to receive more money. So Meysam agreed with the paradox of embeddedness.
Hope you learned something! See you!
Recently I had a conversation with my aunt Jenny. She was born in Austria and started her career when she studied business economics after which she continued with sport marketing. Coincidentally she ended up in the TV Business, after her former colleagues recommend her she should have a talk with Joop van den Ende.
This is a form of social relationship as described by Uzzi. Her form colleagues used their network to embed Jenny within another network and exploit its opportunities. Since a social relationship often involved quite a lot of trust this was a real benefit since it improved the resources being shared within the network. After her career at Endemol she went to talk with a few other companies for a new job. As she was always a hard worker she had enough of working for someone else, she decided to start a company herself.
She had built a big network and knew every important person in the business. Including lot’s of former colleagues and was still in close contact with all the other companies in the TV business. It’s safe to say she was really embedded within this sector of business.
Trust is one important aspect which is clearly visible within Jenny’s network, she is sharing everything with her business network and this improves the quality of resources which are being shared. Furthermore her embeddednes within the network causes the sharing of information with her partners. It does however not increase her problem solving ability. Problem solving is done within the company and does not involve anyone from within her network. Embeddednes plays a crucial role in attaining her desired professional outcomes since it enables her to use knowledge of her business partners. Jenny does not perceive embeddednes as paradoxical since she does not involve her network in her core business. By not involving embeddednes in the business core, unforeseeable change is much less likely to happen. Unfortunately Jenny is not active on Facebook, which prevents me from presenting her network on TouchGraph.
Hey hey! Last week I told you about our new idea to reduce the waste in Amsterdam. Summarizing, it’s about buying misshaped food from farmers, change it into a product, and resell it for an acceptable price.
Since then we’ve tried to contact as many farmers as we could. It didn’t appear to be as easy as we thought it would be. Most of the farmers we called actually didn’t have any waste products because they were linked to farmer stores so they could use their misshaped food into products like juices etcetera. Furthermore we contacted Food Guerilla. Food Guerilla is a network of 150 food initiatives aiming to achieve a more honest, a more sustainable and a healthier food system. We’ve sent them an email in which we explained that we have the same intention as they have in reducing food waste and if they could help us to contact any farmers with too much misshaped food. We’re trying very hard to make as many contacts as we can to get our new enterprise start ASAP! Any help or thoughts from you would definitely be appreciated!
See you soon!
This week I had to interview an entrepreneur about the relational and structural embeddedness. Where relational embeddedness is the personal relationships people have developed with each other through a history of interactions. The structural embeddedness is the structure of the overall network/configuration of ones network. I asked her about the role of embeddedness and also about the paradox of embeddedness. This paradox is in short: more embeddedness gives an entrepreneur several advantages while the result of too much embeddness is that an entrepreneur is too busy with the existing relations he or she is hampered.
I women I interviewed owns a lingerie shop and has plans to expand on the Internet with a web shop. While the shop is 15 years old already, she noticed that due the economic crisis people prefer to shop online and get things cheap instead of tailored advice. Having a business in this sector requires not that many connections although it is important to built a good relation with every customer. Having a good relationship with a wholesale company is important to get a discount. Faith or trust is the keyword in this case, the wholesale company wants to bind the entrepreneur for a longer time. With less connections its easier to oversee everything and focus on these relations.
At the other side, all the connections in a retailers association makes it hard to make things happen. Some retailers/entrepreneurs in the same street are forming groups, this makes it harder to discuss agenda items because all voices have to be heard. It’s not hard to understand that making a compromise is easier with only 5 people than 20 people.
Even an entrepreneur with a small business in the retail sector experiences the paradox of embeddedness, something I had no idea of at the start of the interview. It’s important to control all your relations and filter the unimportant ones out.
The challenge for our internship is going better step-by-step. This week we sat together and looked at all the to-do’s we had planned for last week, this way we try to make sure everybody does a part of the challenge and make sure we keep the overview.
As said before, we now focus on the leaflet and on the video to create awareness for exit strategies.
For the leaflet we are busy doing several things. First we want to create an “eye-catcher” which contains the most essential parts of exit strategies. To get these essential parts, we are doing a survey among experts with the question to tell us the most important element to take into account when in need of an exit strategy. To get the right “eye-catcher” we are having contact with a designer that would like to make one for us.
For the video, which I’m focussing on, we contacted a friend, who is an expert on video and theatre. We first asked for just some feedback on the script we created for the video, but when she read it she was very enthusiastic. So we decided to make her the director of the video and immediately sat down together to really start off the video-project.
We went trough the script together with her and explained exactly what our goal is for this video. She is going to contact some actors and other people who might help with making this video and we are also going to do that.
She took the idea home and will rewrite the script. We think that if you really want to contact people to help or maybe act in the video, a good script is very important. So next week we will work out the script further and try to contact the right people for acting, a place to film, a camera, and editor, the right music and so on.